FTC Halts Pretexting Operation Connected to Hewlett-Packard

May 29, 2008

By Grant Gross, IDG News Service

A U.S. judge ordered a Florida business connected to the 2006 Hewlett-Packard spying scandal to halt the sale of personal telephone records and ordered defendants in the case to pay more than US$605,000 after a complaint by the U.S. Federal Trade Commission.

Judge Anne Conway of the U.S. District Court for the Middle District of Florida, Orlando Division, ordered Action Research Group and people connected with the company to stop obtaining consumers' telephone records without their consent, the FTC announced Wednesday.

A contractor hired by HP through Action Research Group was at the heart of a scandal revealed in late 2006 in which HP officials authorized private investigators to trace the source of boardroom leaks to the media by obtaining the call records of board members and journalists. The contractor and other investigators allegedly used false pretenses to trick phone companies into providing those records, a practice called pretexting.

In February 2007, the FTC filed a lawsuit against Action Research Group, owners Joseph and Matthew DePantes, and contractors Eye in the Sky Investigations, its owner Cassandra Selvage, and Bryan Wagner. In January 2007, Wagner pleaded guilty to federal charges of conspiracy and aggravated identity theft for his part in the HP pretexting scandal.

In March 2007, a California judge dismissed charges against Action Research Group's Matthew DePantes, former HP chairwoman Patricia Dunn and two other men connected to the HP case.

The Telecommunications Act of 1996 provides that a customer's phone records may only be disclosed "upon affirmative written request by the customer," according to the FTC complaint. Since at least 2005, Action Research Group has sold confidential phone records obtained using "false pretenses, fraudulent statements, fraudulent or stolen documents or other misrepresentations, including posing as an account holder or as an employee" of a phone company, the FTC said.

"The invasion of privacy and security from the unauthorized access to and sale of confidential customer phone records causes or is likely to cause substantial harm to consumers and the public, including, but not limited to, loss of privacy and endangering the health and safety of consumers," the FTC said in its complaint.

The DePantes and Action Research Group agreed to settle the FTC charges, the FTC said. Defendants Eye in the Sky, Selvage and Wagner received default judgments from the court. Attorneys for Action Research Group did not immediately respond to a request for comment.

The settlement and default judgments permanently prohibit the defendants from obtaining, marketing or selling customer phone records or consumers' personal information derived from those records. They also bar the defendants from pretexting or using others to pretext to obtain consumers' information.

The settlement order entered a judgment in the amount of $67,000 against the DePantes and Action Research Group, the estimated amount of ill-gotten gains the defendants earned from their pretexting schemes, the FTC said. That judgment was reduced to $3,000 based on their ability to pay.

In the default judgments, the court ordered Wagner to give up $428,085 in ill-gotten gains and Eye in the Sky and Selvage to give up $110,762.

Since 2006 the FTC has charged 16 people and their businesses with violating federal law by pretexting to obtain phone records. All of the defendants have been barred from pretexting and have been ordered to give up the money they made.